Advertisement
Concrete Analysis | Demand for data centres is in a lull. The national security law has little to do with it
- The current lull is caused by misguided perception about looming oversupply over the next few years
- Hong Kong offers big opportunities given a favourable supply-demand gap, backed by sharp growth in hyperscale and media-content businesses
Reading Time:3 minutes
Why you can trust SCMP
0
A sudden hush seems to have befallen the market for data centres, a coveted asset class since 2019. Investors now seem to be less interested. Some people speculated the National Security Law has something to do with it. Don’t write off the market or Hong Kong, just yet.
Data centres were a highly sought-after asset class, especially during Covid-19, as the unexpected surge in e-commerce, work-from-home regime and demand for online entertainment in the form of video and game streaming, especially in the 5G era, sent operators scrambling for space.
In truth, the current lull has little to do with the security law. The cause is the misguided perception that the market is facing a surge in supply over the next few years.
The city currently has about 8.6 million square feet of data centre space. An additional 5.2 million sq ft is due to come on to the market from 2022 to 2026. This deluge is at the heart of potential operators’ caution, as they assess how long it will take for data centres to sell their racks.
06:22
Three trends shaping China's internet from SCMP's China Internet Report 2020
Three trends shaping China's internet from SCMP's China Internet Report 2020
Investors, who will own the core-and-shell buildings leased by operators, need to know that only 12 per cent of this new wave of supply will be for letting, while the bulk of that will be absorbed by owner-operators.
Advertisement